U.S. techies heading to Latin America

June 17, 2013|Andres Oppenheimer, Tribune Media Services

The exodus of young Latin American entrepreneurs to Silicon Valley and other U.S. technology centers may soon become a two-way street - growing numbers of U.S. techies are heading south to benefit from generous aid packages for high-tech startups.

Brazil, Latin America's biggest country, has followed the steps of Chile by launching a program that is offering domestic and foreign high-tech startups nearly $100,000 in government aid, plus free office space, business mentoring, and legal and accounting services.

Under the public-private program, known as Startup Brasil, up to 25 percent of the selected companies will be from abroad, and have to commit themselves to staying in Brazil.

Startup Brasil operations director Felipe Matos told me in a telephone interview that 909 aspiring companies, including nearly 60 from the United States, signed up for the first round of applications for 50 slots, which ended Friday. The United States was the foreign country from where most non-Brazilian applications came from, he said.

"We want to attract interesting minds, and people who can help us become more competitive," Matos said.

Separately, Brazil has announced plans to significantly increase work visas for foreign high-skilled workers and university graduates in an effort to solve the country's growing shortage of professionals.

Asked why would U.S. entrepreneurs want to move to Brazil, which according to World Bank studies is among countries with the most cumbersome red tape for new companies, Matos said that "There's much more room to grow in Brazil than in mature economies. Brazil is Latin America's biggest consumer market, and there are already 80 million internet users who are only starting to buy things online."

E-commerce in Brazil accounts for less than 2 percent of all commerce in the country, while it's more than 50 percent of all commerce in the United Kingdom. And Brazil's economy is already larger than that of the U.K., he added.

Chile, in turn, launched its Startup Chile program three years ago, and more than 7,200 entrepreneurs from more than 50 countries have applied so far. Of those, and 670 have already been selected and are receiving $40,000 each, plus free office space and work visas. The average applicant is 27 years old.

Unlike Brazil's program, Startup Chile is aimed at bringing mainly foreign startups, and doesn't require them to stay in the country.

"Most applicants come from the United States," says Startup Chile executive director Horacio Melo. "Of the 670 startups that have been accepted, more than 160 are from the United States."

After they spend six months in Chile and do their work, including networking with local entrepreneurs and lecturing at universities, they are free to go home, or wherever they want. About 30 percent of the foreign startups stay in Chile, he said.

"We look for startups that have international growth potential," Melo told me. "If we get these talented foreigners to spend six months in Chile, mixing with local startups, speaking at universities, and mentoring other startups, we all gain. They know better than us where the business opportunities are."

As to why U.S. startups would be interested in going to Chile, he explained that "We accept startups at a very early stage, when they are seen by angel investors in the United States as too risky. So they come here, prove their hypothesis, and then they can move on."

My opinion: Startup Brasil, Startup Chile and similar programs that are being contemplated in Colombia and Peru are great ways to help Latin America internationalize its high-tech industries and compete in the global knowledge economy.

Granted, the bulk of high-tech talent will continue heading to the United States. To put things in perspective, the United States accounts for 75 percent of the global venture capital market, according to a new Merrill Lynch report entitled "A transforming world."

Not surprisingly, the United States registered 134,000 patents of new inventions last year, compared with Brazil's 256, Mexico's 153, Argentina's 67 and Chile's 38, according to the U.S. Office of Trademark and Patents. Just one U.S. company - IBM - registered 6,400 patents last year, 10 times more than all Latin American countries together.

But Brazil and Chile's startup programs will help generate the kind of circulation of talent that China, India, South Korea, Taiwan and other technological powers have been developing for decades.

Although Chile and Brazil are coming from behind, and the rest of the region has yet to join the race, they have a lot to offer: As Matos said, foreign entrepreneurs can find plenty of room to grow in Latin America.